CENTRAL ASIA: China's march on central Asia

by Dr Sharif Shuja

News Weekly, July 16, 2005

The United States, Russia and China are each manoeuvring to exert their power and influence in oil-rich Central Asia, writes Dr Sharif Shuja.

Central Asian states such as Azerbaijan, Kazakhstan, Turkmenistan, Kyrgyzstan and Uzbekistan have huge natural resources, both oil and gas reserves. Estimates vary, but reserves could possibly store nearly 200 billion barrels, i.e., the world's second biggest oil reserve. This is equivalent to the combined recources of both Iran and Iraq.

Contracts worth billions of dollars have been signed with these newly-independent states and joint development ventures initiated; but the region still does not have a reliable export route to the open seas and hence to the world market.

Azerbaijan holds approximately 18.5 per cent of these estimated reserves and was the first state to export petroleum free from Soviet control.

Russian objections

It is presently the largest oil producer in the Caspian region. It has previously signed contracts agreeing to develop two pipelines to Georgia and Turkey accessing both the Black Sea and the Mediterranean respectively. This has eventuated, despite objections from Russian interests.

Russia, the Soviet Union's successor, is the region's most important player. A Russian presence is felt throughout the whole region, as common ethnicity and languages associated with Russia - as well as the Russian Orthodox faith - run through Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan.

The United States has also become an external influence on the region, as it would prefer to diversify its sources of oil rather than depend so much on Persian Gulf reserves. The US now has troops and military bases in central Asia.

Washington aims to develop as many routes as possible in the region to decrease the chance of any one country establishing a stranglehold of flows to world markets. Strategically, the United States would like to block China's entry into the region.

Russia aims to obtain as many pipelines as possible to cross over into its own territories so as to position itself to play a more influential role in "The Great Game".

China is also marching on this region. It has signed a deal with Kazakhstan. Under this deal, China will acquire the right to develop two oilfields in Kazakhstan in exchange for its commitment to build a 3,000-km pipeline from the oilfields to China's Xinjiang province.

The construction of this pipeline is already underway and, when completed, is expected to transport a huge quantity of oil from Kazakhstan to China.

China has also consolidated its relations with Mongolia. Although Mongolia had been strongly linked to the USSR both politically and economically up until the early 1990s, ties between the two former Cold War era allies have since declined.

By contrast, owing to the growing economic might of its southern neighbour, Mongolia's development has been increasingly re-oriented in a way to cater to the needs of booming Chinese markets. In other words, Mongolia is drifting away from Russia towards China.

Now, Mongolia's major trading partner is China. In 2004, almost half of the country's exports went to China and a quarter of its imports came from China. Mongolia also wants to attract mining firms, as well as companies to build roads and railways, as the country's Trade Minister Sukhbaatar Batbold recently announced.

Presumably, minerals are to be mined and processed for subsequent export to China, while new roads and railways are needed to channel freight south. To achieve this goal, Mongolia's government has said it will offer tax breaks to international major corporations such as BHP Billiton and Mitsuito to attract investment in coal and copper deposits.

South Gobi holds a 6-billion-metric-ton coal deposit, and is believed to have enough reserves to supply neighbouring China for three years. Chinese mining companies are also said to be keen to establish themselves in Mongolia.

Of all the countries in Central Asia, Kyrgyzstan seems to be the most likely candidate for closer bilateral ties with China.

China's agenda

For China, its agenda in Kyrgyzstan is simple to acquire access to the country's immense natural resources while blocking any further penetration of US and Russian military power. China has other weapons in its arsenal besides economic clout, most notably the Shanghai Cooperation Organization (SCO).

Despite the rivalry over Kyrgyzstan, the US, Russia and China have a common interest in combating the threat of Islamic extremism, which has entrenched itself in the southern part of the country. In 1999 and 2000, the Islamic Movement of Uzbekistan launched cross-border raids into the country from neighbouring southern Kyrgyzstan.

China cannot help but be concerned about events in Kyrgyzstan and the threat of Islamic extremism. Considering how China's own Xingiang province, with its 12 million restive Uighurs, borders Kyrgyzstan, Beijing hopes to maintain contact and cooperation with the new government in Bishkek in order to effectively address these critical issues of regional security.

Dr Sharif Shuja is research associate at Monash University's Global Terrorism Research Unit.